Agfa-Gevaert To Split Into Three Independent Businesses, Plans To Initiate Major Cost Savings Plan

Friday, June 23, 2006

Press release from the issuing company

Mortsel, Belgium – June 22, 2006 – Agfa-Gevaert has decided to split the group in three independent businesses: Graphics, HealthCare and Materials. The new business called Materials will group all of the film manufacturing activities with the niche products of Specialty Products and will be positioned as an independent supplier of film and related products. This structure will give each business the maximum flexibility to implement its growth strategy and to further reduce costs in line with the rapidly changing market circumstances. Agfa-Gevaert intends to achieve annual cost savings of an estimated 250 million Euro by 2008, primarily in general services and in traditional products across all business groups and regions.
Over the last years, Agfa-Gevaert has evolved from an analog imaging product company to an innovative provider of digital imaging and IT solutions and services. This successful transformation was the result of a clearly defined strategy, combining investments and acquisitions in new growth areas (such as industrial inkjet and healthcare IT) with divestitures of non-core activities (such as NDT and Consumer Imaging). Since the beginning of 2006, the business groups Graphics and HealthCare are already operationally independent. Agfa will also create a third group, Materials, around its film manufacturing activities. This group will manufacture film and related products on an exclusive basis for Graphics and HealthCare as well as for third parties. This split into three independent businesses is a logical next step as it will allow each group to focus on its core activities.
The appropriate structure for each business group will be defined by early 2007. Agfa-Gevaert NV will operate as the holding company for the three independent businesses.
All three businesses – Graphics, HealthCare and Materials – are active in highly competitive environments which are characterized by a decrease in some of the traditional film markets and steep cost increases of raw materials. The independence of the businesses will give each group the necessary flexibility to successfully implement its growth strategy, to strengthen its competitive positioning and to control its costs in line with the changing market conditions. Agfa therefore intends to reduce costs annually by 250 million Euro by 2008 on a worldwide basis – primarily in general services and in development, production and distribution of the traditional products – across the three business groups.
Over the next two months, targeted actions to streamline the organizations and to realize the cost savings will be developed. These plans will be presented at the end of August and will be in line with the distinct strategies and investment plans of the business groups.
Agfa Graphics will continue to be a global leader in complete pre-press solutions and high-level service, and will expand in industrial inkjet and in emerging markets. It will invest in innovative technologies in inkjet, digital prepress, software and services. Graphics will secure its competitive position by improving profitability and growing the business and targets to be a 1.9 billion Euro business by 2008.
Agfa HealthCare will continue to invest in the international roll-out of its hospital IT platform. This will be driven by a global leadership in hospital IT, including enterprise-wide healthcare information systems, and a strengthened leading position in conventional and digital medical imaging. HealthCare plans to achieve at least 1.7 billion Euro revenues by 2008.
Agfa Materials will focus on being a low cost producer of primarily film and related products on an exclusive basis for Agfa Graphics and Agfa HealthCare as well as for third parties. Materials will also develop, produce and sell film based imaging solutions to industrial markets outside the printing and healthcare sector, such as the printed circuit board industry, aerial photography, movie film and identity and security. The expected decline in some of the traditional film products will be compensated through the growth in new applications. On a stand-alone basis, including the sales to Graphics and HealthCare, Materials will be a 700 million Euro group.
“Creating three independent businesses with a streamlined cost structure will give each group the best opportunity and the necessary means to strengthen its leading position in its respective markets. This plan is in the best interest of our customers, employees and shareholders”, states Marc Olivié, President and CEO of Agfa-Gevaert.